Why Was the Marshall Islands Greylisted or Blacklisted?

Marshall Islands on the Global Watchlists: What "Grey" and "Black" Actually MeanCopy link to section

If you are weighing whether to incorporate a non-resident entity in the Marshall Islands, the grey and black list question matters because it determines how EU counterparties, banks, and tax authorities treat your company. The short answer is that the Marshall Islands sits on no major non-cooperative list: it is absent from the EU blacklist following the February 2026 revision, it is not on the EU greylist, and it does not appear on the FATF list of countries with strategic anti-money-laundering deficiencies.

That clean standing is recent and was hard-won. The jurisdiction has twice been added to the EU blacklist and twice removed, so the relevant facts for a foreign owner are not only the current status but the pattern behind it.

This article explains who maintains these lists, why the Marshall Islands was listed and delisted, what residual concerns remain, and what all of it means in practice for banking and due diligence. It is most useful to foreign business owners, fund managers, shipowners, and advisers structuring holding or offshore vehicles with EU exposure.

The Bodies That List Jurisdictions: EU, FATF, OECD and Others ExplainedCopy link to section

Several institutions publish "lists," and they measure different things. Conflating them is a common and costly error, because being clear of one does not mean being clear of another.

The EU list of non-cooperative tax jurisdictions is the most consequential for tax structuring. First adopted in 2017 after screening 92 countries, it is run by the Code of Conduct Group for Business Taxation and monitored by the European Commission, with updates twice a year at the February and October ECOFIN meetings.

The EU list has two parts. Annex I is the blacklist, covering jurisdictions that have not engaged constructively or have failed to deliver promised reforms; Annex II is the greylist, covering jurisdictions that have made commitments but have not yet finished implementing them.

The criteria fall under three headings: tax transparency, fair taxation, and measures against base erosion and profit shifting.

FATF, the Financial Action Task Force, runs an entirely separate pair of lists focused on money laundering and terrorist financing rather than tax. Its "blacklist" names countries subject to a Call for Action, while its grey list identifies Jurisdictions Under Increased Monitoring.

The OECD's Global Forum on Transparency and Exchange of Information for Tax Purposes does not publish a blacklist as such. It peer-reviews jurisdictions on exchange of information and the Common Reporting Standard, and weak ratings feed directly into EU listing decisions.

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Marshall Islands and the EU Lists: Annex I Blacklist and Annex II Greylist HistoryCopy link to section

The Marshall Islands has appeared on the EU list twice, in two distinct cycles, and on both occasions the issue was economic substance rather than exchange of information.

The first listing came in 2018, when the jurisdiction (alongside the United Arab Emirates) was added to Annex I for failing to implement economic substance requirements by the end of that year. In October 2019, ECOFIN recognised reforms to the substance framework and moved the entity registry's home to the lower-risk Annex II greylist.

Full removal from all EU lists followed in 2020, in a batch that also cleared the Bahamas, Bermuda, the British Virgin Islands, the Cook Islands, and several others.

The reprieve did not last. On 14 February 2023 the European Council re-added the Marshall Islands to the blacklist, together with the British Virgin Islands, Russia, and Costa Rica.

The second listing was again short. At the October 2023 ECOFIN meeting the jurisdiction was removed from both annexes, while Antigua and Barbuda, Belize, and Seychelles were added to the blacklist and two others were moved to the greylist.

Why Marshall Islands Was Listed: The Specific Reasons CitedCopy link to section

The EU was precise about its objection. At the February 2023 relisting it stated that the jurisdiction "facilitates offshore structures and arrangements aimed at attracting profits without real economic substance by failing to take all necessary actions to ensure the effective implementation of substance requirements."

ECOFIN's finding was that entities incorporated locally but doing no business there were taxed at zero or only a nominal rate, without real economic activity. That outcome failed one of the EU's fair-taxation criteria and pointed to insufficient enforcement of the substance rules for non-resident domestic entities.

Both the 2018 and 2023 listings rested on the same root cause: a gap between substance rules on the books and their enforcement, not any failure on exchange of information.

The jurisdiction contested the second listing. The Minister of Finance, Brenson Wase, argued that the Marshall Islands had engaged in open, transparent dialogue and made every effort to meet its EU commitments, and the EU Delegation for the Pacific acknowledged that engagement while noting that progress had been insufficient to avoid Annex I.

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The FATF Position on Marshall Islands: Current Status and Past ConcernsCopy link to section

On the anti-money-laundering side, the Marshall Islands is not on the FATF grey list or blacklist; it carries no "strategic deficiencies" designation. No international sanctions are in force against it.

That said, the underlying assessment is mixed. The third-round Mutual Evaluation Report by the Asia/Pacific Group on Money Laundering, adopted in September 2024 and based on a late-2023 onsite visit, gives a sober picture of how the system performs in practice.

The report flags concerns a foreign owner should weigh. Money-laundering and terrorist-financing risks in the Decentralised Autonomous Organisation sector are not well understood by all authorities, and the Trust Company of the Marshall Islands, as registrar for non-resident entities, does not proactively share risk indicators with other agencies.

The evaluators also recorded no controls on nominee directors, nominee shareholders, or bearer-form share warrants. They noted that the offshore corporate sector is promoted through a worldwide network of Qualified Intermediaries, most based outside the jurisdiction and outside its anti-money-laundering rules. The full APG evaluation report sets out these findings.

OECD and Tax Transparency Assessments Affecting the Marshall IslandsCopy link to section

The jurisdiction is an early adopter of the Common Reporting Standard and participates in the OECD Global Forum as a non-member. Its CRS implementation is under assessment by the Global Forum, and the final peer review report has not yet been published.

Interim Global Forum reports stay confidential. Jurisdictions have until June 2026 to address preliminary recommendations before final reports are issued.

Among the early CRS recommendations, the OECD advised that local banks collect additional customer information before opening accounts, and the Ministry of Finance reports that it is working with those banks to put the measures in place. No final exchange-of-information peer review rating has been published, and the number of tax information exchange and double-tax agreements in force is not part of the public record reviewed here.

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The Commitments and Action Plans Behind Listing and DelistingCopy link to section

Both delistings followed the same template: the EU set a specific concern, the jurisdiction acted, and the EU recognised the result.

In the first cycle, the commitment was to introduce economic substance requirements by the end of 2018. Amendments to the Economic Substance Regulations were accepted as fulfilling that commitment, producing the October 2019 move to Annex II and full removal in 2020.

The second cycle turned on enforcement rather than enactment. The jurisdiction strengthened its enforcement measures and, as Minister of Finance Casten Nemra noted, the EU responded positively; ECOFIN's October 2023 announcement stated that the Marshall Islands was delisted because it had "made significant progress in enforcement of economic substance requirements."

The principle is consistent across both cycles. A jurisdiction leaves the list once it has addressed the stated concern and brought its tax system into line with the good-governance criteria.

Timeline of Listing and Delisting: How the Status Has EvolvedCopy link to section

The February 2026 EU blacklist names ten jurisdictions: American Samoa, Anguilla, Guam, Palau, Panama, Russia, Turks and Caicos Islands, US Virgin Islands, Vanuatu, and Vietnam. The Marshall Islands is on neither that list nor the greylist.

Practical Consequences for Non-Resident Owners: Banking, Due Diligence and PerceptionCopy link to section

When a jurisdiction sits on the EU blacklist, member states apply defensive measures against entities based there, and that is where the cost lands for a foreign owner. The measures can include punitive withholding tax on payments, non-deductibility of costs incurred in the listed jurisdiction, controlled-foreign-company rules, and limits on the participation exemption.

From 1 January 2021, member states committed to applying at least one of four specified legislative measures against blacklisted jurisdictions. Reporting obligations such as DAC6 can also attach to arrangements involving a listed jurisdiction.

During the February to October 2023 blacklist window, EU-based investors, lenders, and counterparties were required to apply these measures against Marshall Islands entities. That created real friction for shipping companies, funds, and holding vehicles with EU exposure.

Since October 2023 those EU defensive measures no longer apply on the grounds of blacklist status. The risk has not vanished entirely, however.

• The low effectiveness ratings in the 2024 APG report and the unresolved concerns over non-resident entities and the DAO sector mean banks may still apply enhanced due diligence under their own risk policies.

• Correspondent banking access remains an operational concern, and local banks and remittance providers have long experience meeting AML controls partly to preserve those relationships.

The reputational dimension persists too. Contractual parties, investors, and partners may ask questions about an entity registered in a jurisdiction with this listing history, and you should expect to document substance and ownership clearly.

Current Standing and Outlook for the Marshall IslandsCopy link to section

The position to act on is straightforward: no EU listing, no FATF listing, no sanctions. The defensive measures triggered by blacklist status do not apply.

Two threads still warrant attention. The jurisdiction remains under APG follow-up after a 2024 evaluation that recorded zero high or substantial effectiveness ratings, and the OECD Global Forum's final CRS review is pending, with the June 2026 deadline for addressing preliminary recommendations bearing on the eventual outcome.

Structural gaps that drew scrutiny have not all closed. The APG asked the jurisdiction to urgently assess the risks of the non-resident entity and DAO sectors, the absence of controls on nominee arrangements and bearer-form share warrants stands flagged, and two blacklist episodes in five years show a pattern of commitment followed by enforcement slippage that a third cycle could repeat.

Against that, the jurisdiction has shown it can engage and remedy concerns inside a single EU revision cycle, clearing the 2023 listing in eight months, and the Ministry of Finance is cooperating with the OECD on CRS improvements.

ConclusionCopy link to section

A non-resident entity in the Marshall Islands does not, by reason of any current grey or black list, attract EU defensive measures or FATF monitoring. The history matters because the listings were both about enforcement of economic substance, and a foreign owner should expect banks and counterparties to scrutinise substance and beneficial ownership regardless of formal status. Keep an eye on the pending OECD CRS review and the APG follow-up, and structure the company so that its activity, records, and ownership can be evidenced on demand. Clean standing is real, but it depends on enforcement holding, and that is the variable worth tracking.

How Expanship Can Help Your Business in Marshall IslandsCopy link to section

Expanship helps foreign owners read their exposure to EU, FATF, and OECD assessments correctly and structure a Marshall Islands entity so that economic substance, ownership, and reporting can withstand the due diligence that listing history invites. That support sits within a wider set of services for a foreign-owned business in the jurisdiction.

• Company formation and structuring for non-resident entities
• Registered agent and registered office services
• Tax registration and filing support
• Ongoing compliance and economic substance management
• Accounting and bookkeeping
• Introductions to banking and correspondent banking partners

To discuss your structure or compliance position, contact Expanship Marshall Islands.

Frequently Asked QuestionsCopy link to section